How to prepare revaluation account?

Dear Student, its good that you have understood the concept of Revaluation of Assets and Liabilities from Kavya.
However, the solution of your query is already available in the NCERT solutions provided to you on our srite. To view, follow the link provided below:
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On upward revaluation of a fixed asset which has been previously subject to downward revaluation, an amount of the upward revaluation equal to the amount previously expensed is credited back to the Profit & Loss Account.

Example:

Machinery ‘A’ is purchased on 01-04-1999 for $100,000. It is depreciated using the Straight Line Method at the rate of 10% p.a.

PARTICULARS	First Revaluation	Second Revaluation
Nature of Revaluation	downward	upward
Date of Revaluation	01-04-2001	01-04-2004
Gross Cost	100,000	93,750
Less: Depreciation	20,000	46,875
Net Book Value	80,000	46,875
Revalued - Appraisal Method	75,000	55,000
Increase / (Decrease) in Net Book Value	(5,000)	8,125
Debit to Profit & Loss a/c	5,000	0
Credit to Profit & Loss a/c	0	5,000
Credit to Revaluation Reserve	0	3,125

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HERE IS AN EXAMPLE THIS MAY HELP U

Nikhil is admitted as a partner and assets are revalued and liabilities

reassessed as follows:

(i) Create a Provision for doubtful debt on debtors at Rs.800.

(ii) Building and investment are appreciated by 10%.

(iii) Machinery is deprecated at 5%

(iv) Creditors were overestimated by Rs.500.

Make journal entries and Prepare revaluation account before the admission

of Nikhil.

Solution

Journal

Date Particulars LF Debit Credit

Amount Amount

(Rs.) (Rs.)

Revaluation A/c Dr. 800

To Provision for Doubtful Debts 800

[Provision made for doubtful debts]

Building A/c Dr.

Investment A/c Dr. 2,000

To Revaluation A/c 1,500

[Increase in the value of Building & 3,500

Investment]

Revaluation A/c Dr. 650

To Machinery A/c 650

[Decrease in the value of machinery]

Creditor A/c Dr. 500

To Revaluation A/c 500

[Value of creditors reduced by Rs.500]

Revaluation account

Dr. Cr.

Particulars Amount (Rs.) Particulars Amount (Rs.)

Provision for Building 2,000

Doubtful Debts 800 Investment 1,500

Machinery 650 Creditors 500

Profit transferred to

Karan’s Capital 1,700

Tarun’s Capita l 850

2,550

4,000 4,000

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